‘Ridiculous bailout’: R32 billion to keep bankrupt SAA airborne

The amount allocated to South African Airways’ (SAA) Business Rescue Plan has been heavily criticised by the official opposition party.

On Wednesday morning, after numerous uncomfortable delays, Business Rescue Practitioners, Les Matuson and Siviwe Dongwana, revealed a detailed revitalisation plan which, if implemented, could see South Africa’s national carrier rise from the ashes of insolvency. The report, which contains more than 100 pages, details SAA’s dire predicament as a result of long-term mismanagement and grievous financial losses.

The embattled airline, which has teetered on the brink of bankruptcy since 2018, was officially placed under business rescue administration in December last year. In a last ditch attempt to salvage what was left of the national carrier, Matuson and Dongwana embarked on a cost-cutting crusade which included limited flight routes and mass retrenchment plans.

Following conflicts with trade unions over the termination of contracts and delayed salary payments, Matuson and Dongwana noted that the airline would need to be liquidated. The Department of Public Enterprises, under the watch of Minister Pravin Gordhan, opposed the liquidation and managed to buy time for both the unions and the business rescue practitioners.

Fight or flight: SAA has limited options

With the global and local suspension of air travel — as a result of the COVID-19 pandemic — doing little to help SAA’s cause, Matuson and Dongwana painted a particularly grim picture of the carrier’s options on Wednesday.

One of these options, to revive the airline to its full might and return it to the sky, has been condemned by the Democratic Alliance (DA). Alf Lees, DA MP of the Standing Committee on Public Accounts, slammed the proposal which relied on massive government bailouts, saying:

“The Democratic Alliance categorically reject the proposed business rescue plan by the South African Airways (SAA) Business Rescue Practitioners (BRPs), Les Matuson and Siviwe Dongwana, that relies on a R32.65 billion bailout from Government.

The DA will write to the Minister of Finance, Tito Mboweni, to ask him to do what is right and oppose this ridiculous bailout.”

Lees described the proposal for further cash injections as “utterly ludicrous” and “obscene”. Additionally, Lees noted that the proposal forecast further financial losses for at least three years.

SAA bailout – here’s what the money would be used for

Lees summarised a list of rolling expenses contained within the business rescue plan as follows:

  • Lenders – R16.4 billion
  • Staff retrenchments – R 2.2 billion
  • Unsecured creditors – R 0.6 billion
  • Secured creditors – R 1.7 billion
  • Unflown ticket claims – R 3.2 billion
  • Mango – R 1 billion
  • SAA Technical – R 1 billion
  • Air Chefs – R 0.15 billion
  • Trading losses (SAA only) – R 6.4 billion
  • Trading losses: Mango/SAAT/Air Chefs – unknown
  • TOTAL CASH REQUIRED – R 32.65 billion

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